Magazine

Can MTV Stay Cool?

February 19, 2006

COVER STORY PODCAST

Nearly 40 years ago, in a blue-collar Irish neighborhood in Scranton, Pa., Judy McGrath fell in love with music. As much as her father, Charles, tried to get his only child to listen to Duke Ellington on the family hi-fi, she preferred the Rolling Stones, and later, Neil Young. Her mother, Ann, read The Catcher in the Rye to her when she was seven and explained to Judy that the nuns at her Catholic grade school weren't always right: She could have an opinion, too. It was in this progressive environment in the McGraths' small house on Orchard Street that Judy began to imagine a life beyond Scranton, in New York. "It felt like a land far, far away," she recalls. "I'd never been to New York City until I came here looking for a job. It felt impossible, like there was a sense of a tribe, of people I wanted to be part of. So I had this idea that I could write about music. That would be the ideal job for me." She eventually set her sights on Rolling Stone, that pinnacle of pop culture in the late 1960s.

McGrath made it to New York, but never to her favorite magazine. Her life instead took a magical detour that led her to write on-air promotions for a new invention, music television. Twenty-five years later, at 53, she is chairman and CEO of MTV Networks Co. The $7 billion-a-year operation she oversees is a collection of some of the most recognizable brands in the business, from the original MTV to Nickelodeon to VH1 to Comedy Central. Their programs are seen in 169 countries and heard in 28 languages. Under her management are such youth icons as SpongeBob SquarePants, the South Park runts, and comedian Jon Stewart. At night she might be out listening to a new band or at home trolling skateboarding blogs. Or she might be dining with REM singer Michael Stipe. In the past year, Bono has given shout-outs to McGrath at sold-out U2 concerts thanking her for MTV's support of his AIDS and antipoverty campaign. And in a funny twist, she and Rolling Stone founder and publisher Jann S. Wenner, whose writers she idolized, are good pals.

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It's a long way from Scranton. Today the girl with a bohemian streak and rock 'n' roll dreams has one of the biggest and most challenging jobs in media. For much of her time at MTV, McGrath has been a nurturing manager of talent, a pop culture maven with a keen eye for what sells to kids -- a "16-year-old boy trapped in an adult woman's body," as one friend describes her. Now she'll be less a "creative" and more of a "suit" (albeit accessorized with black Chuck Taylor sneakers and Urban Outfitters T-shirts). That's because Viacom split in two at the beginning of the year, pushing MTV and McGrath fully into the public eye. CBS (CBS) went off as a separate company, leaving the new Viacom Inc. (VIA) comprised of Black Entertainment Television, the Paramount Pictures Corp. (VIA)studios, and MTV Networks, which accounts for 85% of all the operating profits. What was a longtime partnership between McGrath and No. 1 executive Tom Freston is now a solo act, Freston having ascended to the CEO job for all of Viacom. Freston, 60, jokes that his relationship with McGrath is the most enduring he's ever had with a woman. After all, they created MTV with folks like Robert W. Pittman, who went on to his rocky stint as a honcho at AOL Time Warner. Their wildly successful convergence play of 25 years ago put music and video improbably together and changed cable TV and music forever.

When the McGraths dropped their daughter off in New York in 1978 with no job prospects, they assured Judy, then 26 and armed with an English lit degree, that she would land on her feet. Soon she was writing stories for Mademoiselle with titles like "Models' Party Tips" and "Men Who Love Women Who Hate Men and Why." Like so many young people who come to New York teeming with ambition, McGrath found that life in the big city was the "ultimate high," she recalls, no matter how lean she was living -- in this case crammed into a Gramercy Park apartment with seven other women. Three years later she was doing the "Dos and Don'ts" advice column for Glamour when friends, impressed with her turns of phrase, recommended her to Pittman. He hired McGrath to write promos that would give MTV a distinctive voice right out of the gate. Today McGrath takes on her new role as the very notions of hip and cutting-edge are being reinvented once again. You might say her challenge is much as it was on her first job: to make MTV unique amid the media clutter.

The music channel may have seemed bold and experimental when it began in August, 1981. But the MTV empire today is a staple of the media Establishment and faces a slew of new threats. After all, it's the iPod era, a broadband world, and the online generation is defining for itself what is edgy and new. Ratings may be strong for many of the channels, but the original MTV isn't the must-see it was. "We watch it because it's there," says Marie McGrory, a Manhattan 10th grader. Can McGrath keep her empire cool enough and nimble enough for Marie's generation and beyond?

Think about the cold dread the MTV chief and her coterie of aging hipster executives felt last summer when they heard Rupert Murdoch had outbid MTV parent Viacom for Myspace.com. The exploding social networking community of 54 million registered young people would have been a perfect fit with MTV. Instead, for $580 million, it went to Murdoch, a steely competitor but hardly an arbiter of hip. The Murdoch deal was no mere acquisition; it was a red flag. In a rare stern message to her senior staff, according to one executive present, McGrath warned that MTV could no longer afford to miss opportunities like myspace. Not when old business models were blowing up and every week brought a new outlet for doing what MTV had done so well for years -- capturing the niche.

So McGrath has declared "a digital Marshall Plan." It signals the end of the one-screen company. The troops must now deliver services across new broadband channels, over cell phones, and via video games. Because MTV is so tapped into its consumers -- "we're more inside the heads of our audience than anybody else" -- advertisers will stay with MTV, she insists. McGrath is willing to shake things up, too. At a company known for nurturing homegrown talent, she broke the mold last November and tapped media consultant Michael J. Wolf to be president and chief operating officer. She added the post of chief digital officer the same month. Nostalgia for the era when Video Killed the Radio Star (MTV's first music video), she says, is a distraction. "Nobody wants to be who they used to be, including us. Media identities, like market share, are up for grabs," McGrath told a gathering of her advertising and affiliate sales executives in Miami in early January. "If we were launching today, the first song I'd tee up would be the [1980s band] Plimsouls' Everywhere at Once."

HOWDY, PARTNER

No piece of the network is under as much fire as the core MTV channels. Its younger audiences are the most easily lured away in this age of do-it-yourself music mixes, podcasting, and streaming video. MTV's ratings growth was just 5% over the past three years, according to research outfit Bernstein & Co., while VH1, with an older, more loyal audience, grew 17%. Comedy Central pulled in 10% gains, largely because of Stewart. Meanwhile, Nickelodeon's $1 billion in annual operating profits is fueled by sales of things like SpongeBob trinkets and Dora the Explorer dolls. "MTV turns 25 this year," says Peter Golder, an associate professor of marketing at New York University's Stern School of Business. "It's difficult to be a mature brand."

So McGrath is doing something alien to the start-from-scratch culture: seeking acquisitions and partnerships. MTV Networks last year bought companies like amateur short-film Web site IFILM Corp. and children's Web site Neopets, treasure troves with tens of millions of sticky users. IFILM just launched a show on VH1, and the Nickelodeon team is helping to design consumer products for Neopets. In January, McGrath announced a deal in which MTV is teaming with Microsoft Corp. (MSFT) to launch a music download service, URGE, later this year. Other forms of media are getting infusions, too, including the movie units at MTV (Hustle & Flow, Murderball) and Nickelodeon (Julia Roberts in Charlotte's Web, due out this year). And never mind the culture wars: McGrath continues to break new ground with channels such as gay-and-lesbian-themed Logo, which so far is seen in 22 millon homes, despite pushback from some distributors.

For McGrath, the networking never ceases. Her schedule for the week of the Grammy Awards in Los Angeles goes like this: a meeting with IFILM CEO Blair Harrison to discuss new projects (she decided to pass up the gala and give him her tickets -- the better to smooth the new relationship); a sitdown with Jeffrey Katzenberg of DreamWorks Animation SKG Inc. (DWA), whose live-action movie business was sold to MTV's sister company Paramount; a tour of the studio's operations and discussions about a possible rollout of consumer products with DreamWorks; lunch with Jared Hess, director of the 2004 indie smash Napoleon Dynamite, to see if he might do some short-form work for MTV. Then a quick flight to Vail by week's end to meet with cable distributors during a ski outing.

As she readies MTV for its changing game, McGrath finds herself a member of the small but growing club of women at the top of big media companies, joining Oprah, Martha, Walt Disney Co.'s (DIS) Anne Sweeney, and a handful of others. Cable TV was supposed to be more open to new leadership, yet the path to the executive suite is still plenty steep. McGrath remembers being thrilled to attend her first industry lunch at New York's 21 Club in the early 1980s. But when she entered, she recalls, "some guy handed me his coat to check." As it turns out, McGrath gets much of the credit for fostering MTV's inclusive culture, all the better for risk-taking and creativity. "There is less testosterone. It's not the system of the old Hollywood moguls where they are throwing chairs at each other," says Pittman. "It's about listening and accepting ideas wherever and whoever they come from."

To the diverse staff of fashion-forward twentysomethings -- think of those colors-of-the-world Benetton ads -- rushing urgently in packs through the halls of MTV, McGrath just blends in. She wears designer suits, true, but she can hold her own with a roomful of hip-hoppers. She tries to go home most nights at a relatively sane hour to her daughter, Anna, 11, and her husband and stay-at-home dad, Michael Corbett, but she always lugs a bagful of scripts and tapes. After Anna's asleep, she peppers executives with Blackberry messages well past midnight.

At the receiving end of those messages is often her new deputy, Wolf. The new president, 44, is everything she isn't: left- brained, slightly academic, a bit stiff in new jeans donned for his job as grownup at the MTV party. Over a 20-year career at Booz Allen Hamilton Inc. and McKinsey & Co., Wolf has looked under the hood of nearly every major media outfit, although he never had a hands-on role. Wolf has a reputation as a brilliant strategist with an invaluable Rolodex, having helped dozens of CEOs navigate through the shoals of new media. He and McGrath met nearly 10 years ago, when MTV became a client.

Wolf's biggest brief is to capture new digital dollars. Current online revenue is about $150 million, projected to grow to $500 million in three years. "Listen, the world has come to us," says Wolf. "The Internet is no longer about text. It's about video. We produce and own more video than anybody." On any given day, he and his boss fuel up on Starbucks, sit on the big sofas in McGrath's office, and plot how to reengineer MTV. They might analyze the 30 to 40 potential deals on his desk. Or he'll recount his talks with advertisers. Right now, Wolf is crafting a plan with Honda Motor Co. (HMC) to market cars to younger buyers across all MTV platforms. (Advertising brings in 60% of MTV revenues; distribution fees, 30%; consumer products, 10%.) "Advertisers would rather connect with that one alpha consumer [young trendsetter] vs. three beta consumers," he says. "We understand that audience, and we can help them do that."

His team is wielding the network's consumer research to win deals, for example, with the makers of must-have gadgets. Studies done for Nickelodeon recently found that kids aged 8 to 14 send an average of 14.4 text messages and make 8.8 calls on their cell phones a day. Executives at SBC Communications Inc., now AT&T Inc. (T), were fascinated by these findings and have begun working with the kids' channel to develop a phone and services for preteens, says McGrath. Jason Hirschhorn, MTV's chief digital officer, is talking to everyone from Verizon Communications Inc. (VZ) to Best Buy Co. (BBY) about using MTV shows and characters. "Consumer electronics are the new Nikes," says Hirschhorn, 34. "Kids want their phones or their MP3 players to say something about who they are." So MTV helped Virgin Mobile Holdings (VMOB) and handset maker Kyocera Corp. (KYO) design a new slider phone.

Reviewing the arc of any career, there's always a sense of inevitability. But serendipity played a big part in Judy McGrath's path to MTV. In 1980, Bob Pittman was an executive at Warner Amex Satellite Entertainment, a company that owned The Movie Channel and a few other media properties. His mission was to put music on cable TV. Pittman's then-wife, Sandy, worked at Mademoiselle and suggested a few colleagues her husband might want to hire. First he recruited Ann Foley, McGrath's friend and today an executive vice-president of programming at Showtime Networks Inc. (part of the CBS side in the Viacom split). Then he hired Brown Johnson, who runs the Nick Jr. brand today under McGrath. A year later, Johnson and Foley sent him Judy.

As much as MTV shaped her, McGrath brought to her job a strong sense of community. If she has been "smart or lucky at one thing," McGrath says, "it has been [picking] good people." She attributes much of that to her parents' "everyman sensibility." Ann and Charles McGrath died on the same day four years apart in the 1980s. "They never really got to see or enjoy the ride," says McGrath. "But they are the reason I had an excellent start to life and why I made this great leap. I never knew anyone in the entertainment world and never could imagine I would be part of it like this." She's hard put to explain why she made it to the top of MTV instead of others but suggests maybe it was about perseverance. "It's a really undervalued asset. It's not sexy, but if you really want something, you've got to hang in there," she says. "I never phoned it in. I have given my share of dogs' lives to this company."

And if MTV is to stay a trendsetter, she'll have to maintain the same kind of anything-is-possible spirit she has encouraged since MTV's inception. The key, she says, is creating a space where people feel safe and unafraid to fail: "Falling flat on your face is a great motivator. So is accident." Her mantra: "The smartest thing we can do when confronted by something truly creative is to get out of the way." That's pretty much what happened when two young producers came to McGrath in the early 1990s with a new idea for a dramatic series that didn't require hiring actors or writers. McGrath was intrigued. The idea was to film seven people living in a New York City loft over several months, following the soap opera of their daily lives and dropping a soundtrack of new tunes behind it. MTV's The Real World debuted in 1992, and reality TV was born. Its 17th season is shooting now in Key West.

FRIEND OF BILL

The scrappy Scranton girl also trusts her gut. There was much debate internally in the early 1990s about whether it was wise for MTV to entangle itself in politics. McGrath wanted to hold forums for the Presidential candidates in 1992 and get kids engaged through the Rock The Vote campaign. She and others felt strongly that politicians needed to hear from kids. To keep up the momentum after Bill Clinton won, they decided to host an official inaugural ball. Certain that Clinton would never show, McGrath says she was taken aback when she got word "about halfway through the show that Elvis is in the building," she recalls. "Clinton walks in, gets onstage, and says, 'MTV had everything to do with my election.' It was the best."

Another flier she took was giving Jon Stewart a second chance in 1998 after MTV canceled an earlier show. When Craig Kilborn left The Daily Show, McGrath voted for Stewart as anchor. "There's just something about Jon Stewart, right?" she says. "The guy has a voice." McGrath is tight with Stewart, who will host the Oscars for the first time on Mar. 5. They talk by phone frequently, mostly chitchat about their kids. And McGrath is one of those rare people who can get Stewart to be serious -- well, almost. "We all understand this is a business, but the quality of the content is everything with her," Stewart says of McGrath. Then he quickly shifts to full deadpan. He says he loves the freedom she has given him to extend the Jon Stewart brand. His latest idea: launching a line of casual wear. "It will be one outfit a week. You put it on on Monday mornings and take it off on Sunday nights." When told of Stewart's idea, McGrath guffaws: "Brilliant!"

ECLECTIC TASTES

McGrath's hunger for fiction, movies, and music takes in the highbrow and lowbrow. One recent morning, she got up before the rest of the family in their brownstone on Manhattan's Upper West Side to read Kate Moses' Wintering: A Novel of Sylvia Plath. Several nights before, she stayed up for Madonna's 1991 concert tour documentary Truth or Dare, even as her husband, Mike, begged her to turn the TV off and go to sleep. Whether it's rereading Samuel Beckett's novel Malone Dies or scarfing up the latest issue of US Weekly, friends say she is voracious. "[Judy] was the only person I ever worked with who knew as much about great literature as what was going on between East Coast and West Coast rappers," says former MTV executive Sara Levinson. "I always thought her intuitive appreciation of storytelling and characters was an enormous secret weapon."

It's the second day of the MTV retreat in Miami, and there's a new urgency in the CEO's message. McGrath praises her team for double-digit ad revenue growth in 2005. But she also warns against complacency in the face of game-changing innovation. In speeches and side conversations in hotel elevators, McGrath presses for MTV to shed its skin yet again and reimagine itself. She did that herself once when she left Scranton and created a new life among New York's glitterati. This is the year her old friend Freston will sell the new Viacom's prospects to Wall Street. So far investors are in a wait-and-see mood: Shares have been flat, at about $42, since the new Viacom began trading on its own on Jan. 3.

McGrath knows that great, envelope-pushing programming is still the answer. That's why she carved out time one afternoon to do what she has done thousands of times, the thing she really loves: listen to a pitch. Three top Comedy Central executives meet in a hotel suite with McGrath to review the slate of possible new shows for the year. The channel was sucker-punched last year when one of its biggest stars, Dave Chappelle, vanished midseason. So Doug Herzog, who heads Comedy Central, Spike TV, and TV Land and is a close personal friend (he was a witness at her City Hall wedding), is hoping for a big hit to fill the void. (It turns out that the four shows Chappelle taped before he bolted will be ready later in the year, so Herzog plans to show them on Comedy Central's new broadband channel, Motherload, and maybe on iTunes.)

Michelle Ganeless, Comedy Central's general manager, shows McGrath a prospective scheduling grid for the year, explaining that advertising is looking exceptionally good for late spring. Lauren Corrao, Comedy Central's executive vice-president of original programming, slips a DVD into a player to show McGrath the new stuff. Herzog, Ganeless, and Corrao are all MTV veterans, so the session is less a nerve-racking pitch than it is four friends eating chicken sandwiches and watching some new material together. First is a clip from American Lives, a part-scripted, part-improvised show about a TV news team in Spokane, Wash. NBC (GE) took a pass on it last year; Comedy Central scooped it up. Among the other shows: a vehicle for politically incorrect comedian Sarah Silverman and Lewis Black's Red State Diaries. If that flies, it would be the third spin-off from The Daily Show after Steven Colbert's The Colbert Report.

McGrath watches, laughs, listens to her team, laughs some more, but never takes notes. When it's over, she says "hey, guys, this looks really good," peering down again at the scheduling grid for the year ahead, one she knows could be her most challenging yet. Then she tosses the paper aside and asks the really important question: Do you think Jon Stewart can get us tickets to the Oscars?